Commercialization Over Innovation in Today’s Economy

“America is running out of ideas,”?declared The Atlantic?two years ago!

Earlier this year, an?article published in The Nature?revealed that ‘disruptive’ science has declined. The study analyzed 25 million scientific papers published between 1945 and 2010 to discover that the disruptiveness of scientific papers has decreased, although the volume of publications has increased.

Radio, airplanes, computers, the atomic bomb, vaccines, and zippers are examples of the numerous breakthrough disruptive innovations of the twentieth century that completely changed the course of their respective industry’s future. The impacts of these innovations have been felt by every living person today — directly or indirectly. For many of us, imagining a world without these innovations is impossible. Yet, per the study in The Nature, such inventions have become rarer worldwide and will continue to do so.

Understanding the Decline in Disruptive Innovation

It’s important to understand that the research paper found innovation is still growing. Indeed,?number of published scientific papers?continues to grow at a comfortable pace of 4% every year. In 2004, an?estimated 1.2 million peer-reviewed papers?were submitted globally each year. What has declined, however, is the disruptiveness of these papers. And what’s increasing is being euphemistically termed as ‘everyday science.’

And the motivations for these inventions were only sometimes monetary.

Everyday science (incremental, routine, or continuous innovation) is also necessary. Continuous innovation has a role to play in society too. It improves and polishes rough “drafts” of inventions into increasingly superior products that companies can market and sell. However, disruptive innovation accelerates humanity’s progress in unprecedented ways. So, it is essential too.

Exploring the Factors Causing the Decline in Disruptive Innovation

Several studies have previously sought to unearth the factors fueling the pervasive decrease in disruptive innovation and offer some important clues.

Large Firms Pulling the Plug on Pursuit of Risky Innovation

Over the last 50 years, shareholders have grown increasingly sophisticated in analyzing companies’ growth potential. So, CXOs and boards are under ever-increasing pressure to deliver more significant profits each year. They do this by diverting funds to projects with predictable and immediate results over the more risky, long-term projects.

According to a Harvard Business Review study, large U.S. organizations like AT&T, DuPont, IBM, Xerox, and more invested in scientific research so much in the ’70s that it often exceeded university research. Since then, investment in research has dropped sharply to a fraction of its previous levels, even though the amount of patenting on development activities remains the same.

A number of us have also worked in these innovation roles and practices with an eye on the future and hope with the investments and alignment, the future is possible — — just to be impacted by budget cuts and restructuring that instead turn this into a musical theatre act when we look back and reflect. It is unfortunate and disappointing to the entrepreneurs and intrapreneurs hired to find those investments and inventions, but again as many say — it is business.

Division of Labor Between Universities and Corporations

As corporations withdrew from research, universities continued to pull their weight. However, some of the more resource-intensive areas suffer because most universities cannot muster the resources required for innovation. Take Pfizer’s use of High Throughput Screening (HTS) processes, for instance. This project’s sheer scope and scale render most universities ill-equipped to tackle it, requiring private sponsorship, which would not come.

But does it matter who is pursuing innovation? The short answer is “yes.”

As it turns out, university researchers have very different motivations than commercial researchers. Academicians are rewarded for novelty and precedence, as in who came up with something first. Industry researchers are rewarded for extracting utility from a new invention or enhanced utility from an existing one. In many cases, academic research is only sometimes usable. It must go through substantial incremental innovation before it’s functional. But, when they can be utilized, they have the potential to be game changers. The mRNA vaccines, which had to undergo decades of unglamorous improvement, are a perfect example.

Gigantic Failures

Although disruptive innovation can catapult an organization into massive success, the hard-to-swallow pill is that research projects often fail to result in a big win or new business. Sometimes, they are realized too late; sometimes, they offer too little immediate value; sometimes, the senior management fails to acknowledge or utilize the innovation’s potential fully; and sometimes, the timing needs to be right.

For instance, although revolutionary, Apple Newton’s touchscreen did not find many takers when it launched. A decade after it launched, the same touchscreen was a colossal hit with the iPad. The market is replete with innovations gone bad, not because of their lack of utility but only because of timing, presentation, price, or other temporary factors.

Linking back into the corporate environments- many of these teams and technologies are amazing when times are favorable and growth-oriented. Still, the innovation initiative is removed when times change due to M&A, economic impacts, or industry consolidation.

The Sheep in a Wolf’s Clothing

Call it experience, expertise, or just plain intuition, CXOs are exceedingly good at killing bad ideas. They are routinely bombarded with bad ideas and perform the balancing act of navigating through them to land on the good ideas — ideas that show promise. However, the problem is that disruptive ideas often sound like bad ideas. And that’s where the problem lies.

Disruptive ideas, by their very definition, occur outside the areas of expertise and experience of business leaders who are perfectly in tune with the industry’s “current” state — existing products, technology, standards, and competition. When they come across an idea radically different from anything they’ve ever seen or heard, it’s hard for them to see its potential immediately. Even when they do, they are now faced with the problem of evaluating the viability of that solution. Sometimes, that can be an expensive and time-consuming affair. Every business leader dreams of gaining a first-mover advantage, but it’s extremely risky to muster the resources required to achieve that, especially since most of these projects fail.

A Closer Look at the Commercialization vs. Innovation Dilemma

Sophisticated shareholders, intense competition, and the spate of failures among R&D-driven organizations forced business leaders to look for low-hanging fruits. And incremental innovation offers precisely that.

Today’s CEOs — and, therefore, R&D teams too — are under severe pressure to deliver superior solutions to business problems under tight and strict timelines. The budgets are limited, their resources are stifled, and their deadlines are more ambitious than ever. Some might view agile development, MVPs, and iterative innovation as nothing more than companies shipping out unfinished work — as is the case with the videogame industry — but there’s tremendous value in getting out a product ahead of the competition, even if it’s unfinished.

With companies’ survival determined by the commercial viability and potential of the products coming out of the R&D machine, firms cannot take a chance with the “build, and they shall come” attitude. The imperative is to build that which “will pull them.” Gone are the days of innovation superstars and changemakers. Today’s innovation drivers are those who buy it with cash — the consumers.

Does that mean businesses should create anything customers are willing to pay for? If only things were that easy!

The Case for Not Letting the Customer Dictate the Terms

Everyone in retail knows, detests, and begrudgingly acknowledges the age-old business maxim: “The customer is always right!” But are they?

Steve Jobs famously said, “Some people say give the customers what they want, but that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d ask customers what they wanted, they would’ve told me a faster horse.’ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

Jobs had a unique approach to innovation. Although it worked for him in his unique context, it does not apply to other business contexts. Nevertheless, his quote has some wisdom to share.

Innovation requires time and resources, but consumer preferences are fickle. If you start building a product that matches consumer tastes and needs today, it could be obsolete or irrelevant by the time you launch it. Sometimes, the consumer may need several months or years before deciding whether they like your product. What happens when they don’t like it? Your time, effort, resources — everything goes down the drain.

That said, if you only invest in incremental innovation, you expose yourself to disruptive innovation from some remote corner of the world.

Closing Thoughts

Long-term business success is a product of an organization’s ability to adapt to its unique challenges in its own context. Incremental innovation helps it extract more value out of its solutions and delight its customers in a myriad of small ways time and again. But they cannot rely on it alone. Change is the only constant in the world; consumer preferences change constantly. Sometimes, your competitors find a way to offer them more value than you, and there’s nothing you can do about it. That’s why you need disruptive innovation.

Disruptive innovation is how they create an entire industry, sector, niche, or space they can call their own and dominate it for a long time before the competition catches up. Even when they do, incremental innovation can help you survive as a market leader or a major market player until you “stumble” onto the next disruptive innovation.

You must pay attention to incremental innovation. It would help if you chose evolution over extinction. At the same time, find ways to make some leaps or accelerate the process of evolution.

Article originally published on?Medium

— Christina shares candid insights and ideas based on her work, network and passion for mobile, payments and commerce. She focuses on the latest innovations from products and growth to people during the day while teaching students and mentoring entrepreneurs at night. Connect with her on?LinkedIn?or?Twitter. All views are my own. —